Serum (SRM) is a decentralized exchange that runs on the Solana blockchain. However, due to Serum’s interoperability, it is also possible to trade tokens from other blockchains on Serum. This means that the protocol can work between different blockchains, which is quite unique. It is more common that only tokens that run on the same blockchain as the DEX can be traded on the DEX.
Another unique feature of Serum is that it uses a decentralized order book. Most other DEXs use an Automated Market Maker (AMM). An AMM is an automated algorithm that determines the prices for tokens, but also lets sellers and buyers swap their tokens between liquidity pools and the user’s wallet address. An order book is normally only used by central exchanges.
Because Serum is interoperable, it can work together with other blockchains, allowing users to trade tokens from, for example, Ethereum or Polkadot. This contributes greatly to the further development of DeFi, because it are interoperability issues that many applications and protocols encounter.
The exchange also has its own native token, called SRM. Users can use this token for various things. For example, it is possible to pay transaction costs with SRM tokens, so that the user receives a 60% discount on fees. SRM tokens can also be used for staking and governance functions.
The design #
Serum is designed to make transactions fast and cheap. According to the team behind Serum, users should experience the benefits of both CEXs and DEXs.
Serum runs on Solana #
Serum is built on a smart contract that runs within Solana’s blockchain. Due to this, it is a decentralized application (dApp), just like many other projects that run on Solana.
Solana is a blockchain known for its high speed. The blockchain can process up to 50,000 transactions per second (TPS). Users often pay less than a penny to carry out a transaction. According to many users, Solana is one of the main competitors of Ethereum.
Because Solana can process transactions quickly and cheaply, Serum users will also be able to benefit from this high degree of scalability. Serum’s competitors, such as Uniswap (UNI), do not have this advantage. For example, Uniswap runs on Ethereum, which has many issues with scalability. On the Ethereum blockchain, users occasionally pay hundreds of dollars in transaction fees and have to wait tens of minutes for their transaction to be processed successfully, which makes the blockchain unattractive for small investors.
Decentralized order book #
Instead of using an AMM, Serum uses a decentralized order book. In an order book, buy and sell orders are placed on a list. This is based on the price. There is normally a central body that ensures that this is done in the right way. This is a lot more difficult to implement when it has to be done on a decentralized network. Therefore, other DEXs use an AMM.
With an AMM, users trade their tokens between liquidity pools. The AMM first determines the price of the trading pair, after which the token swap can take place. Users have little input in this case. For example, users will have to make do with the fixed price, and cannot use special order types.
Serum’s developers have ensured that a protocol automatically links buy and sell orders. This makes it possible to select an order, which also makes it possible to offer cryptocurrencies for a self-determined price.
Due to this, users have much more control over the buying and selling of your cryptocurrencies. That is one of the biggest advantages of the decentralized order book used by Serum.
Conclusion #
Serum is a decentralized crypto exchange that runs on the Solana blockchain, on which users can buy various crypto tokens. These do not necessarily have to run on Solana, because Serum also supports other blockchains, such as Ethereum and Polkadot.
Instead of an AMM, Serum uses a decentralized order book. Normally, order books are only used by central exchanges. The team behind Serum have found a way to still be able to use an order book on a decentralized network.
